Market Forces C r e at i n g J o b s t h r o u g h P u b l i C i n v e s t m e n t i n lo C a l a n d r e g i o n a l F o o d s y s t e m s

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1 Market Forces C r e a t i n g J o b s t h r o u g h P u b l i c I n v e s t m e n t i n L o c a l a n d R e g i o n a l F o o d S y s t e m s

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3 Market Forces c reating j obs through p u b l ic i n v e s t m e n t in local and regional food systems Jeffrey K. O Hara A u g u s t

4 ii U n i o n o f C o n c e r n e d S c i e n t i s t s 2011 Union of Concerned Scientists All rights reserved Jeffrey K. O Hara is an agricultural economist in the Union of Concerned Scientists Food and Environment Program. The Union of Concerned Scientists (UCS) is the leading science-based nonprofit working for a healthy environment and a safer world. UCS combines independent scientific research and citizen action to develop innovative practical solutions and to secure responsible changes in government policy, corporate practices, and consumer choices. The goal of the UCS Food and Environment Program is a food system that encourages innovative and environmentally sustainable ways to produce high-quality, safe, and affordable food while ensuring that citizens have a voice in how their food is grown. More information is available on the UCS website at food_and_agriculture. This report is available in PDF format on the UCS website (www.ucsusa.org/publications) or may be obtained from: UCS Publications 2 Brattle Square Cambridge, MA Or, or call (617) Design: DG Communications, Acton, MA Cover images: (top left & right) istockphoto.com/bruce Block; (lower left) istockphoto.com/eric Delmar Printed on recycled paper

5 m a r k e t f o r c e s iii Table of Contents Figures and Tables Acknowledgments iv v E x e c u t i v e S u m m a r y 1 C h a p t e r 1 Description of Local Food Systems 6 Types of Direct Marketing 6 Demand for Local Food 7 Supply of Local Food 7 Farmers Markets 9 Community-Supported Agriculture 10 Local and Regional Food Systems Have Scalability Challenges 10 C h a p t e r 2 Supporting Local and Regional Food Systems Is Sound Policy 14 Objectives of Government 14 Local and Regional Food Systems Can Support Public Objectives 14 Local and Regional Food Systems and Food Security 15 C h a p t e r 3 Local and Regional Food Systems Provide Positive Regional Economic Impacts 16 Quantifying the Economic Impacts of an Industry or Sector 16 Direct Marketing Can Foster Regional Economic Development 17 Local and Regional Food Systems Can Result in Sector-Specific Economic Growth 18 Economic Impacts of Farm-to-School Programs 21 Farmers Markets Can Increase Sales at Neighboring Businesses 21 Local and Regional Food Systems Can Increase Business Innovation and Entrepreneurship 22 Responses to Arguments against Supporting Local-Food-System Development 22

6 iv U n i o n o f C o n c e r n e d S c i e n t i s t s C h a p t e r 4 Local and Regional Food Systems Can Have Positive Social, Health, and Environmental Impacts 23 Local Food Systems Can Promote Healthier Food-Product Choices 23 Local Food Systems Can Reduce the Environmental Footprint of Our Overall Food System 25 Local Food Systems Can Promote Community Interaction 26 C h a p t e r 5 Investing in Local and Regional Food Systems and Creating Jobs 27 Initial Funding Can Help New Farmers Markets Succeed 27 Programs that Support Local and Regional Food Systems 28 Determining the Economic Implications of Supporting Farmers Markets 30 C h a p t e r 6 Conclusions and Policy Recommendations 32 R e f e r e n c e s 34 F i g u r e s a n d Ta b l e s Figures ES-1. U.S. Farmers Market Locations, Small Farms Account for a Greater Proportion of Agricultural Product Sales from Direct Marketing 8 2. Products Sold by Vendors at Farmers Markets 8 3. Percentage of Farmers Markets with Labeled Products 9 4. The Number of Farmers Markets in the United States Has Increased Rapidly 9 5. Marketing Assistance Needs Identified by Farmers Market Vendors Food Products Sold at Food Hubs U.S. Principal Operator by Age: Farmers Are Aging U.S. Agricultural Acreage by Product: Fruits and Vegetables Account for a Small Fraction of Land 19 Tables 1. States with the Greatest Number of Farmers Markets Per Capita Economic Impacts of Farmers Markets Economic Impacts of Increased Fruit and Vegetable Consumption Potential Employment Impacts of Reauthorizing the Federal Farmers Market Promotion Program 31

7 m a r k e t f o r c e s v Acknowledgments This report was made possible in part through the generous support of the David B. Gold Foundation, the New York Community Trust, the Clif Bar Family Foundation, the Tomchin Family Charitable Foundation, the Deer Creek Foundation, and UCS members. For their reviews of the report, the author would like to thank David Swenson of Iowa State University, David Hughes of Clemson University, Larry Lev of Oregon State University, and Stacy Miller of the Farmers Market Coalition. The time involved in reviewing a paper of this length is considerable, and their comments and suggestions greatly improved it. At UCS, the author thanks Margaret Mellon and Karen Perry Stillerman for the many useful suggestions they provided. Their advice, encouragement, and helpful editing influenced the report s final form. We would also like to thank Steven J. Marcus for copyediting the report and David Gerratt for his design and layout. The opinions and information contained in this report, being the sole responsibility of the author, do not necessarily reflect those of the foundations that supported it or the individuals who reviewed and commented on it.

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9 m a r k e t f o r c e s 1 Executive Summary istockphoto.com/bruce Block When strolling through a local farmers market you may well be struck by the many ways in which the food offered for sale differs from typical mass-produced and -marketed food products. For starters, healthful produce items dominate the farmers market, and they are typically fresher and more flavorful than supermarket produce. Moreover, the presence of the farmers puts a face on who grew the food and reflects where and how it was grown. Less apparent to the casual shopper, however, are the important economic benefits that farmers markets and the local and regional food systems behind them can provide to rural and urban communities alike. In this report, the Union of Concerned Scientists (UCS) explores the recent remarkable growth of farmers markets and other manifestations of local and regional food systems, describes key features of these systems, evaluates their economic and other impacts on the communities in which they operate, and offers surprising data on their potential to create jobs in those communities. Finally, the report addresses some challenges that local and regional food systems must meet if they are to grow further, and it recommends public policies that could help promote and expand these systems in the future. The Rise of Local and Regional Food Systems Markets for locally and regionally produced food are now ubiquitous across the United States. Most of them emerged over the last several decades through the tireless efforts of entrepreneurs, community organizers, farmers, and food and farm policy advocates. In particular, farmers markets and community-supported agriculture systems (CSAs) in which consumers buy shares of local farm harvests in advance and then routinely reap the benefits in the form of fresh food have expanded rapidly and are now established as family- Conservative estimates by the U.S. Department of Agriculture (USDA) suggest that more than 136,000 farms are currently selling food products directly to consumers.

10 2 U n i o n o f C o n c e r n e d S c i e n t i s t s The USDA, in its MyPlate dietary guidelines, recommends that Americans eat significantly more fruits and vegetables; in many regions, local farmers could grow a substantial portion of this additional produce. shopping venues in many cities and towns. Schools, restaurants, supermarkets, and other mainstream institutions are also buying food from local farmers. As a result, innovative farmers are able to develop and expand businesses that generate income in rural communities. Most of these markets were independently conceived as grassroots initiatives, and as such each of them contributes uniquely to its community. These achievements have been particularly remarkable in that they have been mostly self-sufficient realized without the government subsidies that the increasingly consolidated mainstream food system receives. This report shows that local and regional food systems could expand further, with the potential for creating tens of thousands of jobs in rural communities many of which are struggling economically and in urban communities as well. For example, the U.S. Department of Agriculture (USDA), in its MyPlate dietary guidelines, recommends that Americans eat significantly more fruits and vegetables; in many regions, local farmers could grow a substantial portion of this additional produce in peak growing season. Regional food systems could also increase market access for regional meat and dairy producers, thereby helping to foster competition in markets that have experienced significant consolidation in recent decades. Overall, the expansion of local and regional food systems could complement the nation s existing mechanisms for food production, distribution, and consumption. Greater investment in local and regional food systems would thus be an essential step for agriculture policies that seek to support such economic activity. Among the report s major findings are: 1. Local and regional food systems are an expanding part of our food system. Local and regional food-product markets have grown rapidly in recent years and have become entrenched. The number of farmers markets in the United States increased from just 340 in 1970 to more than 7,000 today, and there are now more than 4,000 CSAs. The USDA reports that the sales of agricultural products through direct consumer marketing channels reached $1.2 billion in The demand for local food has been driven by consumers who wish to support local farms and other businesses, to purchase healthful food that is fresh and tends to be sustainably produced, to interact with farmers, and to learn more about the food they grow and that consumers eat. The enthusiasm for local and regional foods has also arisen, at least in part, as a backlash against the deficiencies of our consolidated food production, processing, and distribution system. Local and regional food-product sales often occur through direct marketing channels. For example, a farmer could sell food products either directly to a consumer, such as at a farmers market, at a roadside stand, or through a CSA; or directly to a retail institution, such as a restaurant, grocery store, or school. Farmers who sell their food through direct marketing channels tend to operate smaller farms with a variety of products, such as fruits and vegetables; engage in entrepreneurial activities; and follow environmentally sustainable production practices. These farmers can often earn greater profits by selling their products through local food systems than by selling them to a wholesaler in the consolidated food system. In addition, the opportunity to interact with consumers provides these farmers with firsthand information on the demand for their products. 2. The economic, environmental, and health impacts of local and regional food systems depend on how consumers purchasing decisions are altered. There are a multitude of reasons for seeking local and regional alternatives to the current consolidated U.S. food system. For one thing, that system accounts for 16 percent of the country s energy use and is a significant contributor to climate change. For another, the overconsumption of unhealthful processed foods contributes to Americans increased rates of weight gain and obesity, which have considerable health consequences and large associated societal costs. Fresh fruits and vegetables are particularly well suited to distribution through direct marketing because they are mostly unprocessed. Communities could see health benefits if patrons of local-food markets consequently ate more of these healthful but underconsumed items. There could also be environmental benefits from reduced energy usage if diets shifted to eating unprocessed food as a substitute for heavily processed foods. While more research is needed to demonstrate how consumers shopping behavior may be altered as a result of buying foods produced nearby, available evidence

11 m a r k e t f o r c e s 3 istockphoto.com/bruce Block Modest public funding for 100 to 500 otherwise-unsuccessful farmers markets a year could create as many as 13,500 jobs over a five-year period. suggests that local and regional food systems could help promote the consumption of these products. 3. Local and regional food systems can have positive effects on regional economies. The expansion of local and regional food systems supports employment, incomes, and output in rural communities. Direct marketing channels, such as farmers markets, stimulate rural economies because a greater percentage of the sales revenue is retained locally. Further, farmers may purchase equipment and raw materials from local suppliers. Such transactions increase labor and consequently household incomes, which result in additional spending. An important finding from the literature is that under various scenarios, further expansion of local and regional food systems has the potential to create tens of thousands of additional jobs. One approach to increasing local and regional foodproduct sales is to support the development of direct marketing channels. Such support is invaluable because establishing a local-food market, such as a farmers market, can be a daunting exercise many farmers markets are community-based and -initiated, rely on volunteer labor, have little access to capital, and are nonprofit institutions. Even a small amount of support could help a farmers market become stabilized through, say, the hiring of a market manager, the installation of an electronic benefit transfer machine, and outreach efforts. For example, modest public funding for 100 to 500 otherwise-unsuccessful farmers markets a year could create as many as 13,500 jobs over a five-year period. Local and regional food systems could also lead to job growth through other marketing channels for example, when greater consumption of fresh fruits and vegetables draws on produce supplied locally or regionally. Various studies have suggested that this phenomenon could lead to thousands more jobs in the Midwest alone, even if land allocated to fruits and vegetables displaced some production of corn and soybeans. These kinds of positive economic results could also occur in other geographic regions or for other food-product sectors, such as meat and dairy. 4. Local and regional food systems have scalability challenges, some of which can be addressed through public policy. While local and regional food systems have become more prominent, several challenges remain that could hinder further development. There are geographic and seasonal limitations owing to climate variation and soil attributes on the extent to which local and regional food systems can be established. There also must be an appropriate balance of urban populations

12 4 U n i o n o f C o n c e r n e d S c i e n t i s t s and rural land to ensure that there is both an adequate demand and sufficient supply. Such balance is particularly important for meat and dairy products, which may require scale for production. Moreover, while direct consumer marketing has been a common method to date for selling locally produced food, it too can have scale limitations. Local institutions, processing infrastructure, or regulations may be inadequate e.g., lacking sufficient capacity for allowing local and regional food systems to prosper. Thus the cultivation of additional institutional arrangements, which has occurred with schools but could also apply to mainstream supermarkets and other sectors, is important. Specifically, innovations such as food hubs locations at which farmers can drop off locally produced food and distributors and consumers can pick it up are promising options. An additional challenge is that existing USDA programs may be inadequate for providing the same type of support and assistance to local-food-system farmers that they provide to larger-scale commodity crop farmers. More scale-appropriate mechanisms for providing whole-farm revenue insurance and credit, for example, would be helpful to many small farmers who produce food for local and regional consumption. Some of these challenges (among the aforementioned and elsewhere) could be addressed through forward-thinking policies and sound investments related to farms, food, and local development. We now identify such public policy solutions. Recommendations While the number and influence of local and regional food systems have grown substantially, many issues must be resolved if they are to continue increasing in scale and become more integrated into the existing food system. Further, future efforts to expand local and regional food systems should aim to complement and reinforce not substitute for already established local-food-market institutions, such as farmers markets or CSAs. Specifically, the Union of Concerned Scientists recommends that: Congress and the USDA, in coordination with other relevant agencies, should increase funding for programs that support local and regional food systems. Three types of programs, if funded at increased levels, could foster the continued growth of local and regional food systems: (1) rural development programs that provide funds for investing in infrastructure to support local and regional food systems; (2) programs that offer assistance to farmers market managers, schools, and other local-food-system administrators; and (3) nutrition programs that provide financial assistance to lowincome consumers who wish to purchase healthful food at local-food markets. Moreover, among the multiple federal agencies that administer the various programs that support and promote local food systems, continued and improved coordination is critically important. By organizing programs within one title in the federal farm bill, Congress could effectively bring together these seemingly disparate programs while also raising the profile of local and regional food systems. istockphoto/thinkstock The USDA, together with academic and other policy institutes, should raise the level of research on the impacts of local and regional food systems, particularly regarding their expansion. Funding more research for local and regional food systems is essential for effective future agricultural policy,

13 m a r k e t f o r c e s 5 Figure ES-1. U.S. Farmers Market Locations, 2010 This map shows the distribution of thousands of farmers markets across the country, in all 50 states and the District of Columbia. Source: Agricultural Marketing Service and obtaining more precise data on marketing channels for local and regional food sales is especially important. Other research priorities include the study of how the installation of farmers markets and other local-food outlets influences consumers shopping habits relative to their behavior in the absence of such markets, and the effects on low-income people of nutrition programs that facilitate patronage of farmers markets. In addition, research on the feasibility of establishing local and regional food systems on a greater scale in specified areas would help identify where some of the most significant economic impacts could be realized. Such research would feature comparisons of the potential regional supply (based, for example, on soil characteristics, land availability, and climate conditions) with the potential demand (based on population, consumer preferences, and income). This line of research could also illuminate the land-use implications of local food systems geared to increase production of fruits, vegetables, or other food products. Congress and the USDA should restructure the safety net and ensure credit accessibility for local-food-system farmers. Many attributes of existing agricultural programs are not well suited to supporting farms and other producers that market their food within localized systems. For example, insurance focused on single crops, as is typical, is not convenient for farmers growing a succession of vegetables throughout the growing season. Thus the development of whole-farm revenue insurance, as an alternative to crop insurance for specified commodities, would be beneficial. In addition, ensuring that farmers selling through local food systems have access to affordable credit, either from Farm Credit System banks or from state financing authorities, could allow these farmers to develop and expand their businesses. Lastly, cost-share programs that provide assistance to organic farmers in obtaining certification could also help them sell food products in local and regional markets. Local governments and community organizations should foster local capacity to help implement local and regional food-system plans. The establishment of local and regional food systems requires a good deal of local effort and coordination. When funding is available, there must be evidence that local capacity is sufficient to absorb it and that local food initiatives have reasonable prospects for success. In addition, assistance should be provided to prospective applicants for developing business plans, conducting outreach, and seeking funding opportunities. Farmers market administrators should support the realization of farmers market certification standards. The development of certification standards by farmers market administrators could help ensure the integrity of direct-to-consumer marketing systems. Standards provide confidence to consumers that vendors are involved in the production of the food they sell and are undertaking environmentally sustainable production practices.

14 6 U n i o n o f C o n c e r n e d S c i e n t i s t s C h a p t e r 1 Description of Local Food Systems istockphoto.com/bruce Block As major segments of the U.S. industrialized food system have consolidated and become increasingly remote from consumers, an alternative food system one that offers locally produced food has emerged. This section describes the various types of such direct marketing mechanisms, why some consumers demand locally produced food, the kinds of farmers that produce and sell it, the marketing channels used and the institutions involved, and obstacles that must be overcome for local and regional food systems to increase their sales and also to become more integrated into the existing food system. Types of Direct Marketing There are multiple definitions of local and regional food systems. Certain federal programs define them as systems that market food either less than 400 miles from its origin or within the state where it was produced. Local food systems are also associated with marketing arrangements whereby farmers sell products directly to a consumer or retailer without using a wholesale supplier. Although direct marketing is often used as a proxy for local food systems because it is easier to define and measure, and also because there is considerable overlap at present the two concepts are distinct.

15 m a r k e t f o r c e s 7 Food sold via direct marketing does not have to be locally produced, and vice versa. One type of direct marketing involves a farmer selling food directly to consumers at a roadside stand, U-pick operation, or farmers market, for example, or through subscription programs known as communitysupported agriculture (CSA). A New York study found that full-time direct marketing farmers used a variety of direct marketing channels, while part-time direct marketing farmers reported a greater percentage of sales in farmers markets (Lyson, Gillespie, and Hilchey 1995). In 2007, 136,817 farms sold agricultural products directly to individuals for human consumption, with sales totaling $1.2 billion (USDA 2009, Table 58), although challenges associated with measuring direct marketing sales suggest that this number is understated (e.g., Brown 2002). The reported number of farms engaged in direct consumer marketing in 2007 represented a 17 percent increase from Although 6 percent of all farms are involved in direct consumer sales, they account for only 0.4 percent of total agricultural sales. Instead of selling directly to consumers, farmers could sell food directly to either a retail facility or food service institution, thus bypassing the wholesale distribution system. For example, a farmer could sell products directly to a grocery store, restaurant, hospital, or school. Institutional marketing is generally more feasible for a group of farmers, which underscores the importance of developing cooperative structures. Demand for Local Food There are various reasons why some consumers and retailers are purchasing locally produced food. According to a recent literature review (Martinez et al. 2010), these buyers: Believe local food is fresher Believe local food is of better quality Want to support local businesses and producers Want to know the source of the food Want food with greater nutritional value Prefer food grown through environmentally sustainable practices (e.g., organic) Enjoy the shopping experience Can obtain a greater variety of food Can pay lower prices As reported by the same researchers, the largest obstacles that consumers cite for not buying local food include: Lack of awareness of the existence of local food markets Inaccessibility, inconvenience, or lack of proximity Higher prices (whether perceived or actual) for locally produced food Lack of variety of food, or too-small quantities Food retailers have additional challenges associated with purchasing local food, such as in ordering, delivery, and reliability. Nonetheless, for retailers and consumers alike, the obstacles cited are not associated with the desirability of the food product. Supply of Local Food Some farmers can obtain greater revenue by selling food via direct marketing in local markets than by selling food to wholesalers. That is, direct marketing allows local food producers to retain most, if not all, of the revenue from the retail sale of their product; they can receive up to seven times greater net revenue on a perunit basis from selling locally than in conventional markets (King et al. 2010). These advantages can have important financial implications for farmers, as marketing costs accounted for 84 percent of the U.S. retail sales value of food products in 2008 (Canning 2011). However, they must also market the product themselves, which can incur unpaid labor costs of 13 percent to 62 percent of the retail price (King et al. 2010). Some consumers may be willing to pay a higher price for locally produced food, although food products will generally need to have other attributes, such as being grown through sustainable production practices, to receive a premium (King et al. 2010). Farmers may also engage in direct marketing for the opportunity to socially interact with consumers and retain independence from intermediary purchasers, processors, and retailers. Finally, a major benefit of direct marketing is that farmers can obtain firsthand, real-time feedback about products that customers desire, and then can adapt their business accordingly. Who are the farmers who supply food to local food markets? We discuss four characteristics of these farmers, using direct consumer marketing as a proxy for local food sales. Farmers Who Engage in Direct Consumer Marketing Tend to Operate Smaller 1 Farms Figure 1 (p. 8) shows that farms of fewer than 50 acres account for 29 percent of U.S. direct consumermarketing agricultural sales, but only 2 percent of total 1 Smaller may apply either to farm revenue or acreage. Starr et al. (2003) and Hunt (2007), in case studies in Colorado and Maine, respectively, found that direct marketing farmers produced their food on small-acreage farms.

16 8 U n i o n o f C o n c e r n e d S c i e n t i s t s Figure 1. Small Farms Account for a Greater Proportion of Agricultural Product Sales from Direct Marketing 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Direct Marketing Total Sales 1,000 acres or more 50 to 999 acres 1 to 49 acres Source: USDA Farmers Who Engage in Direct Consumer Marketing Tend to Engage in Environmentally Sustainable Production Practices 2 Figure 3 shows that common product labels at farmers markets include locally grown, organic, chemicalagricultural sales, and these percentages are respectively 62 percent and 30 percent for farms of 50 to 999 acres. Similarly, according to the USDA s 2007 Census of Agriculture, farmers with less than $250,000 in annual sales represented 96 percent of the farms that engaged in direct consumer marketing, and those farmers accounted for 57 percent of the value of direct consumer marketing sales (USDA 2009). Farmers Who Engage in Direct Consumer Marketing Tend to be Fruit and Vegetable Producers Fruits and vegetables are well suited to direct marketing because they require little processing. Vegetable/ melon and fruit/tree-nut producers each account for 28 percent of the value of all agricultural products sold via direct consumer marketing (USDA 2009). Fortyfour percent of all vegetable and melon producers sell directly to consumers, as do 17 percent of fruit and nut producers, but only 7 percent of livestock producers and 2 percent of those growing non-fruit-or-vegetable crops (grains, for example) seek direct consumer sales (Martinez et al. 2010). Figure 2 shows that 92 percent of farmers markets have vendors who sell fresh fruits and vegetables, while 45 percent of vendors at farmers markets sell fresh fruits and vegetables. Figure 2. Products Sold by Vendors at Farmers Markets 100% 90% 80% 70% 60% 50% % of U.S. farmers markets selling selected products % of U.S. vendors selling selected products at farmers markets 40% 30% 20% 10% 0% Fresh fruits and vegetables Herbs and flowers Honey, nuts, and preserves Baked goods Crafts or woodworking Meat or poultry Prepared foods Processed foods Milk or dairy Fish or seafood Other Source: Ragland and Tropp See also Starr et al and Hunt 2007.

17 m a r k e t f o r c e s 9 free or pesticide-free, natural, pasture-raised/freerange, and hormone-free or antibiotic-free. These labels are intended for education and marketing purposes, as consumers use this information to decide whether to purchase food. Local food markets are particularly important for organic producers. More than 17 percent of USDAorganic products are sold through direct consumer and retail marketing (USDA 2010; USDA 2009). Organic direct-marketing farmers earned 75 percent on average more than their nonorganic counterparts, and they sold a larger quantity of commodities than organic farmers who did not engage in direct marketing (Martinez et al. 2010). In any case, organic farming has important implications for supporting more food production: 78 percent of organic farmers stated in 2008 that they intended to maintain or expand their organic operations over the next five years. 3 Farmers Who Engage in Direct Consumer Marketing Tend to Operate Diverse Farms and Undertake Entrepreneurial Activities Small farms with direct sales often grow multiple products (Starr et al. 2003). Farms that engage in direct marketing with no additional on-farm entrepreneurial activities earn $6,844 in average direct sales per farm, but farms that engage in three additional on-farm entrepreneurial activities earn $28,651 (Martinez et al. 2010). Small farms involved in direct marketing constitute 28 percent of farmers that produce on-farm value-added goods such as processed products; such farms also constitute 33 percent of participants in CSAs and 49 percent of organic producers (Martinez et al. 2010). Farmers market vendors have expanded existing product lines, begun additional processing, developed mailing lists, made new business contacts, and sharpened their customer relations, merchandising, and pricing skills (Feenstra et al. 2003). Farmers Markets We examine farmers markets in more detail in this section because of their role as a potential keystone of emerging local food systems (Gillespie et al. 2007), their unique role in facilitating direct marketing sales at farmers markets exceeded $1 billion in 2005 (Ragland and Tropp 2009) and the superior data about farmers markets in comparison to other local food markets. While no consistent legal definition of farmers markets yet exists (Briggs et al. 2010), they are generally conceptualized as structured market settings Figure 3. Percentage of Farmers Markets with Labeled Products 70% 60% 50% 40% 30% 20% 10% 0% Locally grown Source: Ragland and Tropp Figure 4. The Number of Farmers Markets in the United States Has Increased Rapidly Number of U.S. Farmers Markets 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Source: USDA 2011b. Organic Chemical-free/ pesticide-free Natural Pasture-raised/ free-range Hormone-free/ antibiotic-free designed to allow farmers to directly sell their products to consumers. Farmers markets once constituted a conventional channel for selling fresh food in the United States, particularly in cities. Throughout the early and middle parts of the twentieth century, the number of farmers markets decreased as the food system consolidated, interstate highways were developed, and large irrigation projects allowed produce to be grown far away from consumers. By 1970, only 340 farmers markets were left in the country (Brown 2001). This trend has reversed itself in recent decades, however. Figure 4 indicates that the number of farmers markets in the Other 3 Online at accessed July 2, 2011.

18 10 U n i o n o f C o n c e r n e d S c i e n t i s t s Table 1. States with the Greatest Number of Farmers Markets Per Capita Rank State # of Farmers Markets 1 Vermont 84 2 North Dakota 56 3 Iowa New Hampshire 90 5 Hawaii 83 6 Maine 77 7 Wyoming 30 8 Montana 48 9 Washington, DC Idaho 65 United States grew to 1,755 by 1994 and reached 6,132 by 2010, and there are currently 7,146 operating farmers markets. Table 1 shows the states with the greatest number of farmers markets on a per-capita basis and demonstrates that farmers markets can occur in regions of the country that do not have large urban centers. Many of these states are located in the Midwest (Iowa, North Dakota), northern New England (Maine, New Hampshire, and Vermont), and the Rocky Mountain West (Idaho, Montana, and Wyoming). This nonurbanoccurrence phenomenon also holds at the county level, as rural areas have a greater density of farmers markets on a per-capita basis than do urban areas. 4 However, these findings do not imply that there are higher per-capita purchases of local food in rural areas. A farmers market can be administered by some other organization or else become its own organization. The level and sophistication of a farmers market bureaucracy is generally proportional to its size (Stephenson, Lev, and Brewer 2007). Forty to 45 percent of member associations in the Farmers Market Coalition are registered as 501(c)(3) nonprofit organizations (Briggs et al. 2010). Most farmers markets are operated on a seasonal basis (consistent with the growing season), tend to be in an outdoor public location, and establish rules requiring that vendors sell products that they produce themselves (Ragland and Tropp 2009). Community-Supported Agriculture A CSA system is traditionally an arrangement whereby a consumer purchases a share of on-farm produce from a farmer early in the year and receives a weekly delivery of fresh produce throughout the growing season (e.g., UCS 2009; Brown and Miller 2008). Fruits and vegetables typically predominate, though other farm products can be included as well. The benefits to farmers are that they receive payment for their products earlier in the calendar year before harvest, they can mitigate the effects of price or production risks that could occur during the growing season, and by having completed their marketing before growing season they can focus exclusively on production. Consumers may prefer this approach because it enables them to support local farmers, obtain food that may be fresher than store-bought, and learn more information from farmers about how the food is grown. CSA models have evolved over time, and some now do not require that consumers buy a share in advance or allow customized ordering. One directory estimates that there are currently over 4,000 CSAs in the United States. 5 Local and Regional Food Systems Have Scalability Challenges While local and regional food systems are experiencing growing sales volume, barriers exist to increasing their scale. In this section we discuss some of the most serious barriers: challenges pertaining to geographic limitations; impediments to the effectiveness of direct marketing; inadequate institutions, infrastructure, and regulations for facilitating local and regional food systems; and inadequate agricultural programs for assisting local-food-system farmers. Geographic Limitations Geographic limitations suggest that food systems could be more effective at regional levels than at exclusively local levels (e.g., Clancy and Ruhf 2010). First, regional systems can expand product availability throughout the year as a result of varying growing seasons within a region. This local variation can also help mitigate seasonal bottlenecks at processing facilities by having utilization occur over a longer period. Seasonal fluctuations in demand for particular products may exist as well. 4 See map online at accessed July 2, Online at accessed July 3, 2011.

19 m a r k e t f o r c e s 11 Second, while farmers markets are well established in some rural areas, regional food markets may be better for products that require scale for production. In particular, the construction of processing facilities, such as slaughterhouses and dairy bottling plants, incur fixed costs that require a sufficient customer base to ensure they are economical and rural areas may have too few consumers to purchase the resulting products. On the other hand, in localities that are predominately urban there may be insufficient land to grow food because agriculture may not be profitable on land that is relatively expensive. The solution appears to lie between these two extremes. Local and regional food systems may have their greatest opportunity for scale in regions that have urban population centers with close proximity to rural areas boasting available farmland (Timmons and Wang 2010). Eighty-four percent of the farms that engage in direct marketing are in metropolitan counties or in rural counties adjacent to metro counties, and directsales revenue per farm increases as farms become closer to metro regions (Martinez et al. 2010). Research that identified regions with the greatest scope for local and regional food systems could be invaluable in supporting regional economic development. Such research is needed to identify regions that have both the capability to supply local food (i.e., they have the appropriate climate and available farmland with the needed soil characteristics) and sufficient demand to support local food purchases (i.e., metropolitan areas with sufficient population, income, and consumer preferences). The undertaking of such research projects is a priority. Challenges Associated with Direct Marketing Direct consumer marketing has grown over the past 15 years and may continue to grow in the near future, though limitations exist on the extent to which the numbers of farmers markets and other direct consumer marketing channels can increase (e.g., Ragland and Tropp 2009). These limitations arise because the decentralized and uncoordinated nature of local food markets sometimes presents logistical, awareness, and accessibility challenges to consumers. Farmers markets While the net number of farmers markets has increased dramatically over the past 20 years, there can be considerable flux, with markets opening and closing on a continuing basis. For example, between 1998 and 2005 the net number of farmers markets in Oregon increased by 30, with 62 new markets opening and 32 markets closing (Stephenson, Lev, and Brewer 2008). Such turnover is not surprising, as establishing a farmers market can be a daunting task. Critical decisions involve market viability; vendor standards; market administration; risk management associated with insurance, liability, permitting, taxes, and regulation; marketing and outreach; and market infrastructure investments. 6 Other direct consumer marketing barriers include meeting food safety and processing regulations, facilitating payments for low-income patrons with coupons, and understanding local zoning rules and business permit requirements (Tropp and Barham 2008). Figure 5 (p. 12) summarizes challenges that farmers market vendors have identified with respect to the administration of markets once they are established. These challenges include advertising and publicity, local-food promotion campaigns, consumer targeting, displays, information on customer preferences and demographics, and business plan development. Claire Bloomberg/Bloomberg Photography 6 Online at farmersmarketcoalition.org/managerfaqs/#marketingstaff, accessed July 3, 2011.

20 12 U n i o n o f C o n c e r n e d S c i e n t i s t s Figure 5. Marketing Assistance Needs Identified by Farmers Market Vendors 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Advertising and publicity Promotion campaigns Source: Ragland and Tropp Targeting consumers Merchandising Marketing research Business planning Farmers market organizers or institutions may charge vendor fees to cover the costs associated with market administration, but breaking even on costs can be challenging, particularly in the early years of establishment. Most farmers markets operate on shoestring budgets, with the median annual operating budget being about $2,000. As a consequence, 59 percent of farmers markets rely exclusively on volunteer workers, and 39 percent have a paid manager with no other employees (Ragland and Tropp 2009). In some locations, extension-service personnel fill the management function at no charge. Nevertheless, having a paid manager is an important sign that the farmers market is financially viable, as mean sales at markets with paid managers are five times higher than at those with unpaid managers (Ragland and Tropp 2009). Meat and poultry also have unique direct consumer marketing challenges. Consumers may have food safety concerns about meat in an open-air market or may lack a cooler for transporting frozen meat products (Lev and Gwin 2010). Also, operating a meat processing and distribution facility requires specialized skills that differ from those of farming; this fact can make problematic the successful implementation of a farmerowned slaughterhouse cooperative. Facilitating institutional sales Farm-to-school initiatives help schools invest in infrastructure and capacity building to position themselves to buy healthful food from local farmers. Analogous opportunities for local food systems could be explored in collaboration with other institutions, such as the military, prisons, food banks, and hospitals. A particularly critical institutional channel to fostering greater product sales is through mainstream supermarkets (King, Gomez, and DiGiacomo 2010). The lack of financial support, time, and infrastructure are the most common barriers that farmers face in direct marketing to institutions, implying that farmer co-ops or other such groups may be essential to addressing these challenges (Martinez et al. 2010; Vogt and Kaiser 2008). However, aggregation of food from different farmers can lead to obstacles in identifying the source of the food, should that be necessary (Martinez et al. 2010). Food hubs A food hub is a drop-off point for farmers and a pickup location for distributors and customers. It permits the purchase of source-identified local and regional food, coordinates supply-chain logistics, and is a facility for food to be stored, lightly processed, and packaged so that it can be sold under the hub s regional label. As such, food hubs contribute to the expansion of local and regional food markets. The USDA has identified more than 100 food hubs (USDA 2011a), many of which are legally organized by nonprofit groups or public-sector entities. Sixty percent of these food hubs have been operating less than five years and on average they have 13 employees each. Food hub customers include restaurants, grocery stores, colleges or universities, food cooperatives, distributors, school food-service providers, and multi-farm CSAs. Figure 6 shows that while fresh produce is the most frequent product sold at food hubs, at least 60 percent also sell eggs, dairy, poultry, and meat. Innovative marketing arrangements could be encouraged as food hubs expand. For example, virtual supermarkets could allow consumers to order food products online from a local farmer and pick them up the following day. Local Capacity to Support Local and Regional Food Systems Three types of capacity must be fostered to ensure that sales of local and regional food products are increased. First, appropriate expertise and technical assistance are key assets for developing local food markets (Martinez et al. 2010). For example, given the extensive outreach effort that local and regional food systems must undertake, some regions have developed food plans that document the constituent networks, relationships, and coordination mechanisms required. Innovative proposals such as those outlined in the Iowa Local Food & Farm Plan, the Local Food Assessment for Northern Virginia, and a northeast Ohio report, The 25% Shift, address the capacities needed to help ensure the successful implementation of such plans.

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